True (heat kills engines) but of course heat is a function of efficiency, how much of the energy in the gasoline is converted into mechanical energy versus the amount of energy consumed. So more efficient engines heat can deliver the same horse power with less heat, or more horse power with the same heat.
That's true, but there are hard limits to the heat conversion efficiency of an otto-cycle internal combustion engine [1].
Given two engines, both optimally designed to approach those limits, air-cooling is not as practical or as efficient as water-cooling. This means that for a given displacement, you'll hit the boundaries of air-cooling before you will water-cooling. If you want to continue to increase your power for a given displacement, you have to find a way to dissipate the wasted heat energy. That leads you to water-cooling.
It's not that water cooling is that much more efficient, but that it scales more easily. With air-cooling, you have limited space around the cylinders for cooling fins. The head is particularly problematic because of the valve gear. With water-cooling, you can increase the dimensions of the radiator in three dimensions to improve heat dissipation capabilities.
